Market opportunities for your new venture are now immediately worldwide, thanks to the pervasive access to the Internet and social media communication. But this doesn’t mean that you can treat the world as one big homogeneous market, ignoring the vastly different geographic cultures, economic, and political realities. Scaling worldwide is like hyperlocal on steroids.
Many businesses, large and small, have stumbled in this area. For example, Starbucks’ first efforts to expand to Israel and the Middle East failed miserably due to a totally different “coffee culture” there, not accommodated adequately. Even the venerable McDonald’s failed to recognize that in Bolivia, their price per meal was off the charts compared to indigenous alternatives.
Thus, as an advisor to small businesses and startups, I have put together my own list of strategy recommendations to get you off on the right foot and keep you on track as you expand your business outside your local environment, and outside your country around the world:
- Don’t let experience in local markets drive global assumptions. Global expansion is never simply a multiplier applied to local results. Do your homework in each new market and validate it with a controlled experiment before spending big money on a rollout. In foreign markets, this may require feet on the ground, due to lack of available data.
- Check historical data for economic and political stability. Many international markets have a history of sudden or cyclic changes that could dramatically increase your risk, or cut your opportunity. This expectation of sudden change, or their inability to deal with economic shocks means that you should prepare backup plans to minimize the risk.
- Evaluate local transportation, energy, and financial services. These factors can totally change your customer value proposition or your cost of doing business in that geography. In fact, you may need to tune your business model, such as the elimination of free shipping, or adding a customized support contract, to accommodate local issues.
- Factor in currency exchange costs and variability. Smart business owners have learned to lock in exchange rates, manage accounts receivables carefully, and engage local financial organizations who know how to manage transactions in this environment. Currency exchange considerations are especially critical in local contract negotiations.
- Accommodate the local cultural traditions and ethics. The local culture affects not only the decisions a business owner must make, but also how the customers view your business. Failure to accommodate these will cost you money could leave you red-faced. I recommend that you hire people in the local market to manage your business there.
- Investigate local alliances and partnerships. One of the most effective ways to expand your business and grow in unfamiliar markets is to join forces with another company of similar size and market presence that’s located in a territory where you would like to be. Don’t forget to evaluate your competitors for “coopetition” alternatives that benefit both.
- Proactively engage a local expert to build a rollout strategy. The last thing you need in a new market is dealing with early mistakes and trying to repair a tarnished reputation. Uber and Airbnb have both been hurt by tough local barriers and labor laws which can have lasting consequences. Don’t skimp on the cost of using overseas legal counsel.
- Enjoy the challenges and learning opportunities. International expansion is often seen as one of the best learning experiences for business owners, as well as an enjoyable travel opportunity for you and the family. Don’t forget that you are your most important business asset and that your business must be satisfying and fun.
Don’t look for any magic formulas to expand your business globally. The challenges are continually evolving and are, at their root, a product of social interaction, economic evolution, and political dynamics. It will always take smart business owners, armed with the latest knowledge, proper homework, and modern analytic tools, to minimize the risks and maximize opportunities.
Tapping into global markets, especially the large and under-developed ones, not only promises market growth beyond your most optimistic vision but also empowers people around the world to share in a better economic future. It’s time to make the global opportunity part of your business plan today.
Reprinted by permission.